Q29. Value a semi-annual, 8% coupon bond with a $1,000 face value if similar bonds are now yielding 10%? The bond has 10 years to maturity.

A)   $1,373.87.

B)   $875.38.

C)   $1,000.00.

Q30. What value would an investor place on a 20-year, 10% annual coupon bond, if the investor required an 11% rate of return?

A)   $920.

B)   $879.

C)   $1,035

Q31. Georgia-Pacific has $1,000 par value bonds with 10 years remaining maturity. The bonds carry a 7.5% coupon that is paid semi-annually. If the current yield to maturity on similar bonds is 8.2%, what is the current value of the bonds?

A)   $1,123.89.

B)   $952.85.

C)   $569.52.

Q32. What value would an investor place on a 20-year, 10% annual coupon bond, if the investor required a 10% rate of return?

A)   $1,104.

B)   $920.

C)   $1,000.

Q33. An investor plans to buy a 10-year, $1,000 par value, 8% semiannual coupon bond. If the yield to maturity of the bond is 9%, the bond’s value is:

A)   $1,067.95.

B)   $934.96.

C)   $935.82.

Q34. Deep discount bonds have:

A)   less call protection than bonds selling at par.

B)   greater price volatility than bonds selling at par.

C)   greater reinvestment risk than bonds selling at par.

Q35. The price and yield on a bond have:

A)   positive relation.

B)   inverse relation.

C)   no relation.

Q36. A year ago a company issued a bond with a face value of $1,000 with an 8% coupon. Now the prevailing market yield is 10%. What happens to the bond? The:

A)   bond is traded at a market price higher than $1,000.

B)   bond is traded at a market price of less than $1,000.

C)   bond price is not affected by the change in market yield, and will continue to trade at $1,000.

Q37. Suppose the term structure of interest rates makes an instantaneous parallel upward shift of 100 basis points. Which of the following securities experiences the largest change in value? A five-year:

A)   zero-coupon bond.

B)   floating rate bond.

C)   coupon bond with a coupon rate of 5%.

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